I want to get a new car, but maybe I shouldn't?

[caitlin202]

Okay, so I need a bit of advice on whether or not I should trade in my vehicle for something nicer.

I currently am financing a 2010 Mazda 3. When I bought it I had absolutely NO credit, and didn't make a whole lot of money. I got hit with an INSANE interest rate of over 20%. In retrospect, I probably should have not taken the loan, but I needed car and anyways, what's done is done.

Now I am married, I have a job where I make way more money than I did two years ago, and my credit score is in the mid-upper 600's (and so is my husbands). I have paid my auto loan on time every single month since I got it.

My options are to either refinance my current loan and save on my monthly payments (currently $470/month) OR I could trade my Mazda in and get something I really want. If I did that I would have to roll over what I still owe on the Mazda to my new loan. My Mazda has been backed into and hit by other cars while parked three times (big city living at it's finest) and has a cracked windshield from a rock on the interstate. It also has a few tiny specks of concrete on the hood from some extremely inconsiderate construction workers. Obviously, the exterior isn't exactly pretty. I don't really want to spend all the money to fix all those little things when I could trade the thing in for something I really want and be done with it. Upside is that the mileage is low and maintenance all up to date.

I honestly want to trade it in for a used BMW. I just want to keep my payments under $500/month. I know there are maintenance costs involved with owning BMWs but I've wanted one since I first drove one at the age of 17. I freaking love them. That said, I would consider Lexus, Infiniti, Acura, or Audi as well. If I'm going to be paying such a high payment a month I'd rather drive something I LOVE to drive.

And yes, I could just refinance my Mazda and save big time on monthly payments, but I can easily afford it so I don't mind continuing to pay a lot each month. Thoughts?

[fredjacksonsan]

Agreed that you should get out from under that incredible high interest rate pronto!!!

I'd look into refinancing first with your better credit score, and see what you can get. Credit unions generally have better rates than banks, although State Farm Bank (you don't have to be an insurance customer) also has good rates on used cars.

BUT...since you don't really like the Mazda, why not have a look around. If you crunch the numbers, you could probably roll the remainder of the Mazda loan into the new (for you) car with a very much lower interest rate and have the same or lesser payment.

All that said, head out and take a few test drives, see what you like, and talk to some finance people.

I used to live in the DC area, so for a used vehicle can recommend one of the CARMAX dealers that are within easy driving distance. I've bought my last 3 vehicles from them and they make things very easy. Not only do they have nearly make and model on the lot, but they will calculate the loan and payments for you while you sit there, if and when you find the vehicle you like. Their interest rates are usually in the 5-6% range, and that certainly beats the heck out of 20+%!!

Best of luck, there's no way you should pay them 20% for much longer...